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Case 4

KDS Builders Inc., is a reputed construction company. During 2020, KDS Company started a construction job with a contract price of $1,630,000 to build a commercial building. The job was completed in 2022. The following information is available.

	2020	2021	2022
Cost incurred to date	$300,000	$850,000	$1,090,000
Estimated costs to complete	600,000	200,000	-0-
Billing to date	300,000	800,000	530,000
Collections to date	195,000	610,000	825,000

Required:

1. Determine the amount of construction revenue,construction cost, and gross profit or loss to be recognized in each of the three years assuming,

(a) the contract qualifies for recognizing revenue over time and

(b) the contract does not qualify for recognizing revenue over time.

2. Assuming the contract qualifies for recognizing revenue over time, prepare the necessary journal entries for each of the three years to account for construction costs, construction revenue, contract billings and cash collection and to close the construction accounts in 2022.

3.Assuming the contract qualifies for recognizing revenue over time, prepare a partial balance sheet for 2020 and 2021 that includes all construction -related accounts..